Three reasons why market tanked over 4% from lifetime highs in 7 sessions

With the benchmark indices extending losses for the fifth straight session on Friday, the market seemed to have entered the correction zone after a record run of the last few months. The S&P BSE Sensex and the Nifty50 dipped over 4% from the record highs they hit on August 2.  

On Friday, the Sensex tanked as much as 336 points to 31194, while the broader Nifty50 slipped 115 points to 9,704 in intraday trade. Both the indices had hit their respective lifetime highs of 32,686 and 10,137 on August 2. 

Below are three reasons that spooked the investors on Dalal Street:

1) Geopolitical tensions

The ongoing border dispute in Doklam between India and China, and the war of words between the heads of US and North Korea have made investors jittery about the outlook of market. Overnight, Wall Street closed sharply lower after US President Donald Trump made another provocative statement against North Korea, saying that his threat to unleash “fire and fury” on the country was not “tough enough”. Taking lead from Wall Street, Asian markets also slumped on Friday. Meanwhile, the standoff between Indian and China continued in Doklam with little signs of de-escalation of military force from either side.  

2) Sebi move on shell companies

The Security and Exchange Board of India (Sebi), in the beginning of the week, directed the stock exchanges to ban trading in shares of 331 suspected shell companies, moving them under the so-called Stage VI of graded surveillance measures, where trading is allowed only once a month. The move turned investors weary about harsher surveillance by market regulator on other stocks. While, the Sebi has somewhat relented on the issue, not the bearish outlook of investors! Despite Securities Appellate Tribunal (SAT) staying the Sebi order, shares of Prakash Industries and J Kumar Infraprojects hit their lower circuit of 20% today as trading resumed in these two stocks after a gap of three days.  

3) Disappointing June quarter earnings

The June quarter earnings season has been a mixed bag so far. While, the companies like Infosys, Titan, HDFC Bank and Reliance Industries surprised positively, many more such as TCS, Tata Motors, Bajaj Auto, Dr Reddy's, Lupin etc disappointed the Street. The net profit of a sample of 600 companies that had declared their results by Sunday, declined 2.8% year-on-year (YoY) in the June 2017 quarter, which is the worst in five quarters. If companies in the oil and gas, and banking and financial sectors are excluded, net profit has declined by 2.9 per cent, which is the worst in the last six quarters. CLICK HERE FOR FULL REPORT